Friday, 18 January 2013

Blockbuster Busted

Only a couple of weeks ago, we said to each other, "How can Blockbuster survive? Who wants to go out of the house to rent a DVD and then have to take it back the next day?"

Blockbuster rose to fame when home video recorders hit the mass market. If you wanted to watch a recently released film then you didn't have a choice but to rent it from a video library. As the market shifted to easily copied DVDs and downloads, small, independent video libraries began to close down. Blockbuster, through the buying power of its franchise, mopped up what was left of the market. But a dying market is a dying market, regardless of how big your share is.

And so Blockbuster bites the dust along with the other dinosaurs who failed to respond quickly enough to changing buyer behaviour.

One rising star appears to be old High Street favourite Argos. They have made a number of smart moves which have tapped into customer behaviour.

Years ago, you'd pay for your item then just wait at the collection desk. More recently, Argos introduced an electronic allocation system where you receive a ticket with a number on, then wait until your number appears on a screen. The items don't come out in numerical order, so what Argos cleverly created was a lottery game to entertain shoppers while they wait. If that was intentional, and I suspect it was, then Argos have done an outstanding job of understanding who their customers are and what they like.

Argos have now tapped into a new seam of gold. Internet shopping has moved on from its early days when shoppers knew that buying over the Internet was risky but were tempted by low prices. Internet shopping is now a mainstream sales channel with all of the High Street brands having online stores which have lowered customers' perceptions of risk.

Since the risk is lower, price sensitivity has reduced too. Customers no longer feel that they are taking a big risk which must be rewarded by a lower price, their criteria is moving to convenience, which they are prepared to pay more for. The problem with Internet shopping has changed from the risk of a purchase not turning up to the frustration of having to wait for it.

Next have addressed this problem with a next day delivery network. Argos launched their 'click and collect' service. Brilliant. All the excitement of Internet shopping, and you can go and collect, so you don't have to wait in all day for the courier to turn up, only to find a 'you were out' card on your doormat as you come out of the toilet.

Focus, Comet, HMV, Blockbuster and Argos have all proven that the Internet is more than a sales channel, it's a whole market in itself. The only thing that comes as a surprise is how many retailers still don't want to believe that.

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